Earnings call transcript Q2 2023

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Operator

Hello, and welcome to the 2U Inc.

Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator instructions]

the to turn now will conference Mr. over I Relations. Virostek, Head Investor of Steve Please go ahead.

Steve Virostek

Good welcome everyone, quarter you, afternoon, Thank Sarah. and conference XXXX call. to earnings second XU's

Co-Founder afternoon Joining our Lalljie, Officer. Chip call on Financial Executive this me Paucek, and the Chief our and Paul Chief Officer; are

Our release made be available presentation today. and are Investor on the will earnings website this and webcast press Relations a slide available replay of later

remarks, we will take prepared questions. our Following

Any and forward-looking made implementation plans agency industry operating plans this statements laws other this anticipated financial on subject as forward-looking call will guidance reflect and regarding Statements in These our for of assumptions. to the partners, and learners university today duty matters. strategy, no statements and have our and results, include objectives we operations, statements analysis made management to for them. on are platform of trends and update for of or regulations changes our call and risks future uncertainties our

and SEC our from December and XXXX ended risks may refer the forth for in for set actual those that our other risk release year the annual on factors and including information report XX-K to uncertainties the to on Securities our in filed results with Form documents press XX, described to materially the assumptions Please cause filings differ Exchange and such Commission earnings statements.

for measures, from non-GAAP to of In addition should we addition, a considered XU's measures during isolation non-GAAP our financial are not which These be useful and in results. today's discuss will supplemental substitute performance. we believe GAAP as measures call, or in

on comparable our release measures, additional earnings find can page website. with these and non-GAAP Relations results in reconciliations Investor our disclosures of GAAP press You including the regarding

to So Chip. let call the with me hand that,

Chip Paucek

Thanks, Steve.

strongly strong the and platform in down a moving from margins, We business QX. to XX%. believe to organic strategy. double-digit EBITDA increased our due direction sustained edX Notably, to costs continue is have platform we the leads right We drive the

for the result, have As a to we're our reiterating while cover some increasing line. Paul later did from in something year top full detail. shift in QX revenue line guidance bottom the year, will our We

expectations color want it's first, Digital But on to The on our the give commentary I'll moment. a whole strategy. critical is full high-quality sector the only as year future massive increasing. provide EdTech society. in for some a is education low more of I and our market. and need for is a penetration global EdTech

to preeminence strategy clear one day outcomes of is And space. can outcomes, to our scale deliver only We're apparatus accelerate company correct belief we me built only the hard are It's by my but that driven differentiation. that this becoming also at the achieve more in because not our tech it's parts. which by that will just by delivers the people. AI that an the Many

our We with of and to closer team we synergies. consumer, is To so reorganized and properly, it new knows creating us platform brings believe attack costs revenue This continue strategy. Everyone profitability. our do lowers acquisition the a generates this long-term edX we we to sustainable to actively. lots moved

Think to our long-term customers, greater both offerings platform as emphasis certain turning transitioning our growing us and of of future attributes platform. are suited dials to our products a of the that Part rotation needs involves be long-term adapting the by rotating this creating the and to critical our of to day universities company students. on better

it, this see keys I there five As rotation. are to

we've access expanding those First, selective greater from and affordability. been highly with programs to expensive and

needs to better manage of aggressively the base. suit to continue customer XU see will our portfolio evolving You our

will first time, be some non-degree. larger In alternative Second, our credentials business. XXXX than for degree from expect now been rotating the time degree we're and for to our have we

Our acquisitions Trilogy of here. and critical were GetSmarter

serving with efficient Third, to consumers and and therefore, we're gaining addressable larger governments extremely access to model. an enterprises from rotating market reaching

offerings You'll us make in continue with see revenue unique XX% space. the XU to Enterprise quarter. grew focus of a the this enterprise growing that on business series

continued strong in expect We growth the future.

more We're from job to rotating doing we're frequent Fourth, better a to purchases. subscription-based purchases a single model. moving

infancy, subscriptions, its part in in While will particularly we our for and increasingly markets, enterprise an XXXX. business of important believe be XXXX

created continuing we're include finally, industry content content and Fifth the by to diversify base leaders. to

XX% part launches on CapEx-light Our of very acquisition The deals incredible bearing bill of is launches. is that these of content up not most year-over-year. majority vast edX strategy Course are given fruit. are these course

evaluate offerings evolving for programs exit manner student a portfolio To deliver and we'll dial now continuously must we discussed strategy, years needs. portfolio of rotating times, the fit. do those our the not We've this few in that we've towards our current of in some and continue past this and at managed

and been all. always not positive student, XU. offerings university, We've laser-focused at drive on the changing delivering the that ROI That's for a

regularly through management ensure we continue that deliver programs our reexamining portfolio fact In helps to promise. on that

of of but financial our the just efficient portfolio, and managing the the for not one, programs; key four about shareholders. When our resource four, we greater creates value for strategic of Proper importance allocation; management the two, health relationship program; three, students, factors; with portfolio the ultimately think the partner. debt-to-earnings ratios

revenue will pushed which quarter, would us in confident feel QX continue we they close, significant year resulted to makes back quarter. full to year. expected We're the the Of the good into of about note very additional our some half in These the programs which in for have sunset were expectations.

degree to want move highlight I notable Before on, two developments. I

occurring are meet pricing. share we've is increase a this This revenue seeing in We're Our in attractive demand for due our flex of programs bringing discussed a and model. model. unveiled before previously recently a market that new to seen our radical never have part rotation pace that need signings at

aggregate this. better We've both. pathways the on a the never offers The in new share-based model platform to bring bundles really run. variety that lower, programs either is has students, and anything from to to exist the because the home like university into new and Flex a us are attractive revenue allows of or cost degrees programs, seen select been It

Also note, CapEx-light typically bundle model prefer model our by university. paid flex not netting purchased universities out course full the this the core marketing to very XX%. generally plus compared is build Note, is at as

ramping at Demand I'm pleased degree programs for target our means the from XXXX announced launches, our previously flex model XX to up we're that XX programs. launches. doubling to least of we're cadence announce, for

launch XX current not regulatory is dissuading want of them. clearly sharing. revenue is historic that, and programs, remember may our XXX% high. over share in properly. our a deals, for with have largest on climate Universities schools Regardless, to out the aggressively also increase that create Universities was built You our confident revenue navigate might year an ever option a revenue any something want and regulatory spoken XX sharing. really support we model, the not plans, long-term toolkit We're environment wanted share -- revenue want our isn't for that on a to short- and that new

to announce our flat fee excited We're model.

shorter-term three based we Our This of fee, and fee to flat standard we our program is model. five a the model, share-based years. provide. across nonrevenue services for In to services, expect would a the contract board particular on charge an flat fee include flat simple innovative this

share Instead to our universities to competitively on in charges doing strategy. revenue available revenue what success platform the excellent on might of price long-term fee market be this flat This it model, renewal operating and our not ourselves from face, formula of program a because or based sharing schools can a betting for fee-for-service will We upon of proprietary would basis, the combo a the history XU term. the suffer relationship. and list our first in of do of never-ending the fee on

main fee be revenue for a It's guaranteed flat the XU One is will extremely fee. positives of predictable. fixed the

think In competitors will addition, to replicate. difficult very I for it be

history that flat our have to models sharing clear, To model, it, the to fits will share be be track ecosystem, response as revenue note, record with believe initial cash it we -- revenue this as model fee and of based important continue have profitable revenue-sharing this price smaller the will sell will an strong profitable We our will will think be to Also but be be crystal and we part flex much burn. nicely the conversations. operating on we believe the believe a

our product A lines. few developments on notable other

in Our business camp Boot coding segment. a jobs, although softening so in some we've the to We're tech a continues bit of some that having seen impact. grow terms and innovate, of is in recession

also segment. Fortunately, a start. notable that our in is off the great great enterprise is camp It's results the Boot generating business Boot new AI camp to

adding surging. and business [ph] ed off ton platform exec edX Our is a We're the successfully we're of AI content. converting really

completion typically It segment. a for real at compared the in boasting a to teams rates completion differentiator enterprise is XX-plus ed in Exec competition. is best percent cohort-based, the our

of impact few the a Finally, AI. comments on

someone at to scale. AI has First teach

pace content but that We company. are the continue. is platform of earlier, I new to alluded on AI and excellent will the it

Second, huge inside a are our chatbot the These engagement to of plug-in. moat. some competitive This our will edX through and implementing for our we be on already generative legacy edX new driving our is deepen support positive AI on implementation ChatGPT user tools business, believe allow and us eliminating us Xpert our and evident cost. platform

layer. has experiences, to are is Cohort-based and the This just drives around learning, drive significantly powerful. higher it rates. tools are efficiently hard these us other XU more people-mediated actually allow mode beginning. product build will results AI on But the service build and the instructor-led durable but our to completion

ed things of strategic will and rate people of those teens Our over create our it cohort-based the from or competition learning exec replace industry learning processor will doesn't other XX%. greater our in low AI but significantly creating interactions. of rate people with have these shows completion compare AI completion efficiency at implementation not to best and

high-value we're business AI bring our combination contact. at XU. of the uncanny stages greater about can around drive the early unlocking very, It and moat a of very of substantially and can it. our people We're durable costs The plus drive the AI power human and excited greater valley across bridge down

to Chief will our that outstanding on Walmart other Officer; Product want in to in he background McCullough I companies. hire be an executive is edtech at executing and Aaron Finally, strategy, our to highlight Uber, we an stints added that addition critical

changed next And and lot, critical around the platform driving of also journey a ahead be a working into seen corners our we've competition. lot. of we've XX phase will our years in Aaron the strategy.

capabilities have and space. than suite in product a We anyone our more better

conditioned will current our Paul Our are to team of face new this challenges through business the now you Paul? take era. and results.

Paul Lalljie

later, Chip our year, in company here's the where up of sustainable to good I year long-term of afternoon, XX-month said last profitable basis. opportunity significant to and on our to on is second are capitalize Platform call that set of objective we a quarter drive strategy the everyone. and Thanks, On us. growth front A the

All Adjusted platform leads as $XX XX and We million. of X percentage marketing EBITDA of healthier efficient from grown revenue increased by has more percentage points the points. reduced indicators by business. sales a organic and a and percentage

from quarter. totaled Credential of down segment, look an the by $XXX.X increase due quarter driven closer FCEs, ago, year the XX,XXX second totaled at quarter primarily a a from totaled X%. Equivalents FCE Full X% XXXX, Alternative Revenue decreased Taking while Revenue $XXX.X revenue X% which Course from or X% a a for XX% in for in results. FCEs, per million, increase the the to million, decrease of

for increased revenue due by softness our coding Camp of strength artificial to cybersecurity our offerings, offset demand revenue Exec the segment. increased in intelligence stronger courses. on Ed our Boot

mentioned, that. of a and be Enterprise As now the grew has ours Chip support $XXX and numbers continues bookings XX% of almost million. focus annualized enterprise to

decrease XX% in revenue million, the to segment marketing last decreased a implementation new FCEs, Program framework XX% primarily driven $XXX.X summer. of Degree reflecting our by

the are spend to Given now that time impact. from revenue, seeing we marketing

certain of agreements management As expected the portfolio we in finalize sunset second programs. to part quarter, our efforts, to

segment However, pushed would These second the of the these the half in into have the were degree generated revenue agreements in year. program quarter. second

take expenses. a look let's and at cost Now

includes increase charge up quarter, million. $XXX.X from quarter totaled of the non-cash $XXX.X million, second in the in year. second operating This last $XX.X $XXX.X of a million quarter million impairment current the For expense

impairment This second the of quarter for last charge the driven platform was from Without strategy. operating quarter primarily decreased by year expense reflecting a XX% efficiencies a paid $XX.X and decline reduction decrease amortization expense. decrease the our $XX.X decline million million personnel expense personnel-related and in in and expenses, restructuring in a $XX.X costs, million and million depreciation in $X marketing from

$XX.X To million This we had a of based for stock impairment our a elaborate occurred. to decline a assets intangible million as a result and charge analysis impairment price write-down non-cash assets. on led evaluation and determined market an the interim goodwill our on triggering that of capitalization, event certain reduction $XXX.X

quarter non-cash XX% percent in prospect in of marketing year. and sales reduction the amortization items such from million compensation as and sales the to to quarter revenue was XX% This spend a stock-based XX% driven from expense in marketing the last declined Removing down a XX% and last second decrease in percent same $XX.X as period revenue decreased as depreciation and by a Marketing on of year. generation. second of

second period Stock-based compensation expense X,XXX full-time brand XX% year and to the significant from of quarter employees granted prior lower last totaled for due million quarter awards value. to reduction compared the ended year. the $XX We combination X,XXX of with the the in down in equity employees a

year million $XXX.X of charge and in second lower last to operating expense. $XX.X in million of higher by $XX.X expense partly on the $X loss million offset $XXX.X impairment net Moving of profitability. to the totaled the quarter of loss compared and reflecting quarter million million interest non-cash a Net for

to EBITDA Adjusted quarter the of XXX for a totaled in compared negative segment EBITDA in XX% for the the the XX% margin XXXX. quarter to compared period XXXX. the EBITDA Adjusted margin quarter a of for same point Adjusted a Degree flat was Alternative from the Credential quarter, $XX.X year. margin margin second the basis second last X% of was XX%, improvement segment a million,

a million of discussion $XX.X a with the sheet $X.X cash million flow from cash statement. $X quarter. balance of of ended and for We the of the decrease to million end quarter the equivalents Now first cash and

timing follow the the university payments reminder, calendar. academic a from As of our partners

As first a million -- result the accounts increased receivable quarter. accounts payable from $XX.X balance $XX.X to million

quarter In decrease addition, lower million we and from accounts payable first expenses quarter. the with a the accrued million, $X.X of ended $XXX

free months flow, ended generated slight trailing XXXX, a million cash over period year. of the $XX.X unlevered the XX same XX, improvement For we June adjusted last

XXXX the of discussion guidance. a for Now

as the of As focused the scaling build enter advantages on continuing second and platform we company. a our to adjusted remain business, increasing half year, competitive we EBITDA our

and the have are We guidance the to million million, revenue from the particularly execution generate in expected primarily that growth back year. reaffirming on representing are to the the by half of impact range social following; expected half our the of strength based portfolio half is in stronger of midpoint. led to our revenue $XXX year, X% of enterprise at we XXXX signed guidance transactions This second programs $XXX the growth expected management contracts back

revenue During the approximately second our XXXX be first quarter earnings call, we the said in more than first that half XX% would half. of

for shift However, back year the XX% of first back quarter the in year, due the revenue half. second to now to half a anticipate to the in revenue the of compared increase we the half from

revenue higher the our expect degree enterprise shift to fourth the accelerate discussed. Specifically, to our quarter in in to we segment generate revenue and we due revenue just

are marketing. spending platform our On particularly to respect the deliberate adjusted paid with can corporate seeing more we we strategy and EBITDA, we've that be on demonstrated of benefits

our result, approximately adjusted the or $XXX XX% revenue adjusted from guidance $XXX million we're ranges. and at growth EBITDA guidance to increasing of As million EBITDA range of midpoint a to the

degree To conclude, offerings. our enterprise the is numerous this, momentum significant we're in our leads, in are strong for the marketing velocity, There the flex strategy including and efficiencies, seeing growth indications working. platform demand of content growth organic the

our We out XXXX degree for new are beat on while our options track portfolio to our financial program meet rolling partners. and goals, perhaps optimizing and

competitively and company of of a profitability continued education improvement in resilient All flows. positioning cash the the building is to business for differentiated which more and deliver future

to I'd operator the the that, call questions. for With turn to like

Operator

with of George Tong question you. first [Operator comes Instructions] Sachs. from the Thank Goldman line Your

Your open. is line

George Tong

Good Hi, afternoon. thanks.

cadence XXXX XX. and impact program intensity You're new launches of generation? your doubling of the flow capital launches from expected you XX for initially to the degree the Can free cash of discuss new anticipated these

Chip Paucek

Yeah.

are content online also velocity course So CapEx George, courses that them all are as in that programs top offerings, do on light. very include new edX build. launches the the on all of And The the of portion vast majority CapEx side, just but of existing degree the the these already not online of on they're decent on the programs. a not market

double there burn we get revenue and sort there's they the So quickly. of cash don't a is benefit have more

really it going pipeline like anything on So what's before. with is very seen never positive. we've It's

So we the like also financial characteristics.

tuition to So of rotating can that would average be. half our you've historical the got business programs a to somewhere of what meet close demand sort tuition average a of

think we future that's in business. degree revenue very sort of So of for also the positive the the long-term

George Tong

it. helpful. Got That's

talk fee impact the to? you that? about what flat this so which if You likely model. to any expect the would revenue you new a if And appeal And also would talked streams? revenue from Can about of existing potential introduction quantify incremental would how customers cannibalization model be

Chip Paucek

So existing we model, the at clients programs. expand we add if things number impact negatively our what that want these folks share revenue pretty -- and of clients allows just base. out us And to good our I into revenue might impact would announced don't testing some and share say to something when we're existing our some had just like clients. wondering be we're out a the some reality that potential the degree flex is might just toolkit aggregate larger trying and market The to to a model determining

contract length. So there's shorter obviously a

record can tell longer-term We're don't on we ourselves space a want you to is operating share but flat have that in something reality not do flat this of number notion our bet of bet The fee. by believe a of a relationship is willing the in revenue fee-for-service that because have ability extremely most on in our fee. interested sharing are both our to track limited to this history, and to university still that revenue and our partners we as folks popular cadence, ourselves want

The we've really So had fee-for-service we just been for some very popular. and get pickup. some hasn't additional is think reality we'll solid time

we fee have great bet predictability. That's expensive. So of the individual onerous people at including of that to that in like a of of positive. us bundle flat list ability in full our on go sort flat but And full idea allows -- not a fee ourselves -- gives sort to our having to having that and you gets real the and that long do components a forward, fee-for-service bundle times ultimately,

excited it pretty we're George. about So

at response flex that pipeline, come that year they the the been like you've get soon. least about into pipeline is big the of revenue the overall thing look amount notable board that long-term related universities are in think J stellar. this to steady-state XX next the But have we'll faster for the has model don't We you play we cases, actually because large of sort And from And announcements aggregated started very that a have on at to say to coming when are willing we should pipeline. you do both curve. overall that, got

George Tong

it. you. Thank helpful. Got Very

Operator

Silber from Jeff comes BMO line Capital question next the with Your of Markets.

Your line is open.

Jeff Silber

Thanks My Paul. is so probably much. question for first

us In I terms Maybe I is. be there's that the would in color again, the can of shift second the One half. in if seasonality you you're XQ. know shift quantify second cadence quarter in the give you mentioned you business, really a That of helpful. know, your steep And from the ramp terms some to and between the can half. some looking guidance for in up second revenue XQ pretty what but

Paul Lalljie

the the quarter degree shift third some quarter think year. second sign, allowing to year that a the guidance we like we several in new the you on to that reflects the basis enterprise at year-over-year some brings the that significant of of similar numbers, quarter, now to basically has those at up quarter that growth looks The customers second hit But fourth from kind beginning range at a new around as of the we and whether the achieving basis. have of the type beginning annual third the quarter the So, pipeline. same is And our it looks quarter that second half on in of contracts plan of that quarter. with we the third of side the a to and quarter have -- the back we a of that Jeff other plan year on forecast, an had house our then launches, revenue we contracts us of benefit new on that have know and ways our contracts the second produces time, the fourth any the

EBITDA we when control Most the and the -- areas that over. one flow importantly have we is probably of on side those of equation side cash it the more

then bit have we up we visibility help So, sure the everything EBITDA we wait-and-see that it's come XXXX, the the deliver but one those that making side we tremendous contracts we're of one the are feel that's will QX the XXXX. can equation, sites can on what little in. have confidence probably business numbers. we before a in now we're the And more sites resilient deliver like and set playing that we of a And a of mode us that control. we have And for to doing is

Jeff Silber

then programs? you having renewals on it's with for you terms to want coming renewals. other And up great when hear next hear. a partners? side, of to talk are cetera? flat we great about to of That's the next revenue maybe in year. launches degree equation fee Should of the out the Are of program degree the right. share remind type et shifting those us different to expect your in side contract negotiations your All I accelerated about Can

Chip Paucek

-- before it's we through it's mention to for the you continually Existing a like percentage we're I very, of get or substantial – clients. the I'm kind revenue going our -- some greater revenue of with not discussion XX% contracts very -- much number We have never done with mean, negotiation Jeff, in nonetheless, locked. Yeah, I'll pretty represent our the we're of than do to questions. that and marketing, plus do are our as bundle in what of in at people interesting of interested is me case What's full our in which the current very relationships is in heard sort new most core the flex to stage. client the model have flex, cases. feel navigate ability might really very people -- to you some confident this similar moving about flex

we any believe I I'm that renewals to don't that So have after until trying XXXX. verify [indiscernible]

Paul Lalljie

XXXX Chip. Yeah,

Chip Paucek

you, Thank Paul.

So,…

Paul Lalljie

Okay.

Chip Paucek

are the where programs existing … share we've if feeling to what cash about under for therefore they really them courses already in positive exist exist the sense much have doesn't cases historically make doing exist that revenue very like full you has and client definitely some base. imagine the create the already. bundled There already place. been been you known because, current have those might clients that as already, And as

to So, just you giving fee keep sort clients And more-and-more reality options. I want options, but come is up the see the opens we of platform. them we think them think flat existing on degrees just to The clients. with the more give at should opportunities, if not new we

Jeff Silber

Right. Thanks That so much. makes sense.

Operator

the Your next comes & from with MacDonald question Needham of line Ryan Company.

is line Your open.

Ryan MacDonald

existing a of sort portfolio. the evaluate and for Thanks portfolio questions. topic idea to common and Chip start my to Paul, was conversation the on Hi. of Maybe taking the obviously management continuing

the around And to of many sunset programs go or expected a valuation programs is as sunsetting additional undertaking are level programs Given that degrees the commentary on talked XQ. contributing you of I'm into that Alternative factor be in larger the what Credential sort of having How sort exceeding we XQ next in shift additional in year? XXXX. you've is curious XXXX, of beyond alternative commentary to about what credentials

Chip Paucek

the are not whether the or they commentary that to out we related. not we Thank want you, No use four with Cred Alt to lay Ryan. to evaluate to continue programs. degree really tried We related criteria

is the partner the Three the to one programs. of four program. is debt And allocation. on various earnings overall relationship. financial And health is resource the the is Two

time now. doing been this some So we've for

of was strongly we it the something important like to our to both understand thought rotating think so fits it importantly shareholders. that out, ongoing business an students We to more but us call also this people for, value that the it's that process gradually for be going long-term probably most is

we've overall, historically been it So with do feel no to we like, impact. able student

I key. think that was the

making good started our we concern outcomes years didn't was really handle in sure student that that outcome biggest students during couple doing these had any a As suffer and a that how overall of way. our in we them ago, process

honestly, gotten it. at good And we've

business multiple partners, So a value we've at all. good the talk these. something going obviously with important It contracts on individual We're gotten pretty or at us continue we is clients to about not smooth to transition the to individual very is for where going. university and is that drive think long-term

good platform. that do Now, a appropriate Ryan in for what's drive the we think that interesting about newer able to more rotation kind we revenue that might those in, got it really cases of is a to that, sort we've think we're so be many revenue mix launches of coming

Paul Lalljie

Alt a about talked a of split. Investor basis. long-term, Cred second we was if it the on Day Chip And here split. I for Yeah. may versus XX-XX then XXXX, jump degree long-term we mix In talked a about Ryan, in XX-XX And at

rotation steady where in you're in, basis. the come you of coming If you'll of think a place comparing programs the that of flex on will and some long-term that newer that a and back get new revenue models, apples-to-apples in to state the are

material becomes go we portion apples-to-apples. of So that business, comparing larger Alt -- becomes forward a really it where the Credit as split

Ryan MacDonald

that. organizations. only not Chip, but skills-based university learning, as growing as of of Super helpful appreciate color. continued institutions, hiring a I skills-based the we're theme follow-up a across Maybe seeing education obviously in also sort enterprise

skills-based Given this Is more how partners you content driver relationships today? to industry this the And of enhancer existing maybe rotational adding to of be you'll tackling your expect that comment the the be about more sort the a of opportunity? you you strategy for or more do to made have platform. university an business to enterprise

Chip Paucek

to ways continue down with -- believe credentials in our Well, honestly the that relationships in of world we in have and backed we schools. have those many of feel universities like on university definitely double strongly best the portfolio very many

the Ryan, that stock So, of you've feel strength our I really now our market think by a university that that larger space in sit the are I of don't and smaller about market. I then like is failing bailing are is and of space of lot out we where the companies we the that sort the represented we right mean overall pipeline. is mean what like got people fascinating sort kind companies of market

we're in getting do think work from way university the to toolkit to sort are away more part provide and them of the That's critical up. the certainly is continue we not and greater with strategy our reason to content content us. content. them We So world university best of the with a partners it's

with of part Now big in some like a that it. industry-leading said companies cases is Chopra. And industry-leading Deepak also individuals

vanity the like in yes if traffic think what's overall quarters think you something do growth year-on-year categories prospects overall learners more drive going five both we of our learner both like -- bit a content is will like growth. in little on that's registered consecutive like with an consecutive overall a regardless a improvement organic look misunderstood that's and of So quarters at in greater little overall of two of terms of We those do and of metric.

do to we that platform. quality think right need both content do and industry quality the content. university To in the like we we're bringing So, people

a you've mix both. seen of big So

is of announcements do University our companies and or. at look think and and then Tel like you IE so Aviv Databricks the course -- overall story If we not University

XX% pivot. a which Silver which not revenue a XXXX. for previous contracts renew It's under quick degree question Jeff one after of is And [ph], under the -- just contract renew thing It's rotation.

bit still in So of we got existing quite the portfolio. a runway

Sorry for real-time. ahead, not Go having that Ryan.

Ryan MacDonald

That's have all for the I color. Thanks got.

Operator

Your next the Morgan Baer with of question comes from Josh line Stanley.

line Your open. is

Josh Baer

isn't And the still why get to the to business on it double-digit I Many today? will for over of thanks margins. negative wanted drivers with question. the that what that are Alt Credit ask guess profitable. I profitable some

Paul Lalljie

boot an flow also of support all business. We're that realignment camp we revenue enterprise leveraging in from We're a of the degree leads the down -- of year, enterprise, basis at then Josh, a a one, towards are organization lot the off better to contribution helping level. did the student an margin Exec the a are coming Number across to an the alternative helping both we're And we annual component last moving through have is that ad get platform profitability. think that we way from A looking on couple as there. the direction. it beginning larger things business credential move to the and our is our on with perspective, and EBITDA becomes business. stream, grows enterprise I

do do back be lots help office to efficiencies way the begun going use we there then a And the as cost cutting run to thing. are basis can it's the particularly we're to you within or And a operate and we've way business of see AI business. XX-month a the efficiently we is the we you in Look, efficient, to we to continues segment. on do serve believe It's enterprise year the get us grow. implementing not that that about of we and last that more continue it's whether to students change and how --

Josh Baer

Great. Thanks.

And line that -- guess, so the profitable to the just I on for to get basis time segment? you XX-month could or update

Paul Lalljie

quarter point particularly Alternative in a basis credential driver growth XX% quarter, in on that this mentioned The At basis. negative to year-over-year expect XXXX XXX we're margin a that the on enterprise quarter. track said significant we material beginning business year, calendar and you with fourth the the being there be hope to be a is to the that. we year of a we improvement still for do And

Josh Baer

Okay.

So that's for the 'XX. full year

Chip Paucek

Full year 'XX.

Josh Baer

QX. just Not

margins. impact Thanks. Okay. toward Great. which profile Alt think Cred, Thank you. with about business the And ahead then margin great the overall like should degree kind has of coming we mean just more I mix to such how shift thinking the business from

Chip Paucek

view. we've to think -- they're second. is quite I'll let a attractive five, did model going you quite ago that may the The Josh that attractive in quite way hear as new large years on you be day XX run the programs of from margin flex did the point Paul us but answer get not margin that a you in back programs mention But basis. a we Well as

Paul Lalljie

Yes.

long-term the flat fee degrees the EBITDA our into and see Day, don't have to We extent provided both We're have said very Investor of. to our that the degrees. if gets around flex at the similar XX% mean of So mix because steady XX%; margins we programs to rotating -- some and with out capital-light term or the at not model in margin model Josh, guidance rotating anything I margins that's roughly Flex better we long we're midterm numbers we those what with anything or midterm it flat year state this just XX%. changing we provided

in So at extent go we margin Credential some And the the Alternative business up mind to is really it ramps forward. we're XX%. that keep as

be it, So of shorter term and XX% on a seems the between Day. long 'XX have to to for to then we get numbers at the we Investor midterm XX% to and are provided the 'XX focus the which path

Chip Paucek

think time becoming side. of continue business and so, content. like time our Alt than students any more on important world We wants We be This out employers very happening pipeline love the over like profitable XX. business degree not getting Clearly a in Degree it really degree never not more manner. same the want pretty because done is pivot. will we're and large and this to At our and Credit is the We've actually well. is it's more what's

we great long-term and for what the drive investing it's value benefit the think in will right students. So,

Operator

William the Instructions] Blair. with comes Sheldon of [Operator next question Your from line Stephen

is line open. Your

Unidentified Analyst

Hi.

today. you [ph] a of You've got Pat for for Mackley I all. questions on have couple Stephen

OPMs, model that that been you any feel updates have update So influenced that there front first to on any the related you fee positioned I may fixed the on had how on front regulatory ask decision? announced or quarter, to oversight wanted just this to of if or driven that

Chip Paucek

No.

in been new. a mentioned a from we revenue drive on just toolkit the to don't from value fee to the ACE share, universities prepared feel not sort are way sort them. There very standpoint. the support additional are like and that offer model an We is comfortable we I for extraordinarily that's of of industry the overwhelming clear where others an want sharing university feel partners As to it's and that basis. And how from is with both -- regulatory important revenue additional flat remarks, some a

share there how was really hard revenue changed has Sort overstate of on support and to for front. nothing much that

pretty didn't So regulatory of announced be flat It's fee a like we fee, we announce flat to because honest. because good. reason. We it,

Unidentified Analyst

Yes.

indicators then noted it in Very enterprise encouraging sounds your and to focus And seen Okay. you what materially on you of you But about that can budgets business, quarter. end this front learning terms continue market general? and in like some growing you've and development clear. just there on demand talk

Chip Paucek

interesting there enterprise the space. differentiated the are about I from seen very think that in to What's are business like you've components is multiple it what

even become very to rate mid-level specifically to or cohort of programs all basis C-suite some configure attractive. that got whether be very and execs able of completion it’d incredibly you're these the in that's level high a driven enterprise first on a you've So, way are to

stuff can. something boot of the of way folks. And We XX,XXX in don't on can business. fully got really sort you've think And do this scale people that passed graduates reskilling we anybody you've camps where we at got order the kind of

can sort So enterprise in we both of cases for handle the these at for it's scale. people, things onesie-twosie and really most

case standpoint, a Then sources again of is where very of a from separately, governments it's for this all the funding the on impact dial government social at mix above. once of tapping and scale of communities reskilling tech to both attractive move all sort local in the

governments the exec individual subscription interested and the in both purchasing got edX camps boot courses, overall the you've themselves. ed to So

So, getting there's for of a opportunity to now there us a just tremendous it's amount nontrivial and number.

outcomes because matter consumer it we would So ton about to or It's outcome is ultimately a obviously of attention a audience. whether paying a people. where really and as been big highly a And drive think When that company you're to single differentiated at can run number we've got more a big really folks number paying is high you're think you're that it. what an rate at way really a of it's we this the for is scale matters like I not we're sort enterprise. that attention will now but of a to looking haven't

very coming and growth we're a XXXX where enterprise opportunity. see now, as right So significant from we XXXX

Unidentified Analyst

Paul Thanks and Understood. Chip.

Operator

Meuler from final Your line of of Jeff question comes Baird. the

is open. line Your

Jeff Meuler

the getting that's you. revenue causing than later recognized this be you're setting dynamic expected later like Apologies half, confused. expecting clear up? me to setting But just the sun revenue why expected Is expecting pushes not more -- be Yeah. QX sun were not just that I'm fees now in Thank it's than be pushed or you in programs to is to recognized back is what that on it's if understanding early out? that break

Chip Paucek

Yeah.

cases particular moved back there's this year. into the It's in forecast. of expected that certain case, in half So the contractual it's a arrangement that simple. the And we in

Jeff. negotiated are agreements, these So

Jeff Meuler

that but Do XXXX at Day? revenue targets and do dynamic from or bullishness and stand Investor XX% also the With you X% those to the that target, growth the change? us comments, rotation new launch CAGR midterm any still gave

Chip Paucek

now in obviously Yeah, call we I a not our at change. guide we're expect all. any right guess, give we're changing not we to Jeff. guidance we said but QX don't we XXXX, update -- as for of what like And to our don't

change. a so the shift guide, manage -- in for the and ask we we about and is business feel the that to And on shareholders. is overall company, a this the impact comfortable don't with reason way think that annual it's questions therefore one going best of of not for quarters part quarter that the is So the the you're that but we we manage course we understand business the

Jeff Meuler

timing Were they Day the targets the at you for the the place the contractual gave sunset us in March? in were that contractual multiyear place at But was the arrangements the that Investor in arrangements time moved?

Chip Paucek

Yeah. there's in forecast. I obviously a lot mean, Jeff a

done We've for the time. in lot puts a there's forecast. and some this takes of So

the Jeff we talked That undergrad quite You in program. about. Simmons particular in bit might you a remember with particular,

the example That's some first six had We've in current you year. ground. have So the months in a substantial on upon impact of did Simmons these an where the that of period.

will We them. continue to have

feel But So a it's manage our overall and shift. play them this moving had that to multiple unfortunately we we on confident to. the mix ability and we're in very like universities in we

Jeff Meuler

Okay. Thank you.

Operator

the will turn no Virostek. are There time. I call this questions to further at Steve

Steve Virostek

questions, an have I everybody so e-mail. day. And for good if follow-up joining much today. you us just call and give Thanks please or want to a me have a thank send me

Operator

This you for Thank concludes joining. conference call. today's

disconnect now lines. may your You

2U (TWOUQ) 8 Aug 232023 Q2 Earnings call transcript